The Prologis partnership with Norges Bank Investment Management includes more than 200 buildings, such as this property in the Netherlands.

As the manager of the largest pension fund in the world, Norges Bank Investment Management (NBIM) of Norway has built a reputation for prudence in acquiring real estate properties. In an effort to diversify its portfolio into logistics, NBIM partnered with Prologis to assemble an impressive portfolio of logistics properties in Europe.

As Europe began to rebound in 2012 from its recent downturn, NBIM turned its attention to acquiring prime European logistics properties. At the time, Prologis was committed to recapitalizing its European portfolio following the acquisition of 100% interest in its European-based ProLogis European Properties fund. For both sides, it was an opportune time to form a partnership.

After just four months of discussions, the company arrived at a deal, a 50/50 joint venture with NBIM called Prologis European Logistics Partners Sàrl (PELP). PELP originated as a $3 billion pan-European logistics portfolio, which included 195 Class-A buildings in 11 countries. A subsequent acquisition by PELP in July 2013 added 11 more facilities to the portfolio for a total of 206 properties.

“Getting all this done, where you have to negotiate documents, control, decision-making authority and dispute resolutions, is a massive undertaking that both parties were able to commit to,” said Guy Jaquier, former CEO of Prologis Private Capital. “When we were in negotiations, we felt our goals and objectives were aligned and that we could be successful long-term partners. This was a significant milestone for Prologis.”

The new partnership—which has an initial term of 15 years with the option to extend it for additional 15-year intervals—allows Prologis to keep control of the portfolio and earn management, leasing and incentive fees. NBIM, in turn, gets the diversity and safety it sought with a best-in-class operator managing its portfolio.

“This transaction really moved the whole market perception with respect to European logistics,” Jaquier said. “People read that a very sophisticated global investor had just invested in a $3 billion portfolio, and it rang the bell for other investors to take a look at Europe and our other co-investments. Today there is high demand for our sector and our product. We believe it has been a turning point for the entire European market.”

08/28/13 - Atle Erlingsson

This joint venture was a watershed event for us and helped restore investor confidence in the European industrial markets.